The government may get a bonanza of about Rs. 100,000 crore through sale of the spectrum vacated by the new telecom service providers, if all of them acquire spectrum through the planned bidding process.
The Telecom Regulatory Authority of India (TRAI) on Monday recommended a reserve price of Rs. 3,622 crore per MHz of spectrum in 1800 MHz band. Reserve price in 800/900 MHz band is double at Rs. 7,244 crore.
The spectrum fell vacant when several 2G licences were cancelled in the wake of the Supreme Court order of February 2 order.An operator needs at least 5MHz of spectrum to run telecom services. Hence, the total amount that the government can earn is close to Rs. 95,000 crore at reserve price. This may go up, if the existing operators also bid for the spectrum.
TRAI has recommended that the sale of spectrum in 1800 MHz and 800 Mhz band should be held in this calendar year.
There is a provision that the companies can make a part payment (33% of the total amount in case of 1800 MHz band and 25% in case of 800 MHz band) at the time of allotment of spectrum and the rest can be paid in seven installments after a moratorium of two years. If all the new operators opt for this, then the government may get close to Rs. 30,000 crore during this fiscal.
The regulator has brought transparency by delinking spectrum with licences. Operators can acquire spectrum through auction. The operators can now offer any service. Earlier, the spectrum was only for a particular service such as 2G, 3G or 4G services. This is a consumer-friendly decision as they will get wider choice of services in 3G and 4G.
The operators, however, find the reserve price very high. "There is no business case with this kind of reserve price," said a new serious operator. "We will not bid at such high prices."
"However, there may be some surprise new comers," said a telecom expert who did not want to be identified.
High spectrum price will delay the roll out of networks. It may also increase the price of services by up to 10%, according BK Syngal, former chief managing director of VSNL.
Even the incumbent operators find these reserve prices very high. "The Indian telecom industry has expressed deep dismay on the TRAI’s latest recommendations on the auction of 2G spectrum," said a spokesperson of the Cellular Operators’ Association of India. "The industry was looking forward to reasonable spectrum reserve price recommendations from TRAI in the light of the government’s own articulated policy directions on affordability, rural penetration, etc."
"Vodafone India is deeply concerned to read the TRAI recommendations," said a Vodafone spokesperson. "We believe that several of these recommendations are retrograde and if accepted, will do irreparable harm to the industry. It will hamper the ability to connect the unconnected and goes against the objectives of National Telecom Policy of ensuring right to broadband."